Today is one of the many times when we complain that “hakuna pesa”. But really, what is money? How is velocity of money more important than the amount?
Let me illustrate with an example: Picture this; Mr. Kamau is the developer and the owner of a number rental houses. He however owes the Mr. Butchery Owner Ksh. 2,000. In turn, Mr. Butchery Guy owes Mr. Otieno Ksh. 2,000 for some repairs that he did at his business premises. Mr. Otieno then owes a shopkeeper who is located in Mr Kamau’s flats Ksh. 2,000.
One day, Mr Kamau got a Mr. Mzungu whom he asks to pay a deposit of Ksh. 2,000 as a ‘viewing fee’ to view his houses in order to make a decision on whether to rent one unit or not. Mr. Mzungu hands over the Ksh. 2,000 to Mr Kamau. Mr. Kamau then immediately rushes to Mr. Butchery Guy to clear his 2,000 debt. Once he pays his debt, Mr. Butchery Guy deposits the Ksh. 2,000 in his M-Pesa account and sends it to Mr. Otieno.
In turn, Mr. Otieno immediately forwards this money to the shopkeeper as payments for the commodities he had borrowed. The shopkeeper is relieved to finally get paid. He then hands over the Ksh. 2,000 to Mr. Kamau who is his Landlord to clear his pending rent arrears.
Kenyan who was accused of hacking, stealing Sh. 4 billion from KRA
After some few Minutes, Mr. Mzungu comes over to Mr. Kamau. He reports that he did not like the rental houses and asks Mr. Kamau to refund the Ksh. Sh. 2,000 viewing fee they had agreed on. Mr. Kamau gives him back his Ksh. 2,000.
Effectively, that chain leaves everyone debt free. That’s how the economy gets chocked when a few barbarians hoard money especially money that is derived from corruption under the mattress. Velocity of Money.